SIG staff suspended after investigation reveals accounting irregularities
A review found ‘historical overstatement of profits’ for 2016 as well as ‘prior years’.
A forensic review at building supplies firm SIG has revealed a string of accounting irregularities and misstated profits, prompting the suspension and investigation of a number of employees.
The group said it called in auditors from Deloitte and KPMG after a whistleblower identified potential issues at its UK insulation and interiors business SIG Distribution.
This resulted in the discovery of “historical overstatement of profit” for the financial year ending December 31 2016 as well as “prior years”.
The half-year statements to June 30 2017 were also affected, although the company assured that underlying profit expectations for the full year were unchanged.
The review analysed the “recoverabilty” of rebates and income from suppliers, and found a number of balances were overstated – “in some cases, intentionally” – resulting in an extra £3.7 million in profits on the balance sheet for the year to December 2016.
Up to £400,000 in profit was also overstated in years before 2016.
SIG said it was “suspending from employment a number of individuals who are being placed under disciplinary investigation into the circumstances surrounding the accounting for these balances and the cash overstatement”.
The company’s remuneration committee is also reviewing malus and clawback provisions relating to incentive payments made to “certain individuals in relation to prior years”.
New controls around rebates and and “other supplier recoverables” have been put in place.
The group as a whole will restate previous financial accounts affected by the misstatements, and is working with Deloitte to ensure accounts are treated correctly.
A further update will be provided when the company releases full-year results on March 9.
“Management continues to focus on the execution of key strategic levers to deliver a step change in the operational and financial performance of the group, as announced at the group’s strategy day in November 2017,” SIG said in a statement.
The news sent SIG shares towards the bottom of the FTSE 250, down 6% or 9.9p to 152.7p in midday trading.